Taking a Pass

If nearly 1,500 new jobs are on the table, it’s not surprising when a location agrees to fork over millions of dollars worth of tax credits to seal the deal. Standard operating procedure in the economic development community, right?

An eyebrow-raising exception to this practice caught our attention this week in Colorado. According to a report in the Denver Post, the Colorado Economic Development Commission rejected an offer from an unnamed Greenwood Village company to hire 1,418 healthcare workers in the Metro area in exchange for $23.8 million in tax credits available under the Rocky Mountain State’s job growth incentives program.

The company reportedly is a pediatric home health care service currently employing 325 nurses and therapists in the state. The firm recently was acquired by private equity owners who are said to be considering Texas or Colorado for a rapid expansion, the Post reports. Because Texas has higher Medicaid reimbursement rates than Colorado, the owners asked CO to provide tax credits to offset the difference.

Here’s where it really gets interesting: the apparent sticking point for Colorado’s ED Commission wasn’t the amount of credits requested by the company, but who would get the jobs.

Commission board member Noel Ginsburg told the Post that the new hires would be “transplants” from other states because local talent to fill the new positions doesn’t exist. “We are [being asked to] subsidize the importation of more people into Colorado,” he told the newspaper, adding that workforce training grants would be more appropriate than tax credits for this expansion.

Another commissioner said he was opposed to “determining winners and losers” in an emerging growth sector. The Commission voted down a motion to approve the incentives, but suggested the health services company re-tool its application and reapply.

Since we’re talking about Colorado here, we’re tempted to ask “What are these guys smoking?” We’ll keep it to this: Really?

So you’ve got a growing business in your state that wants to increase its size—a sixfold increase!—and you’re telling them to come back later because you’re concerned they might bring more people into the state? When a larger state is knocking on their door with a more attractive offer?

We’ve heard the term “transplants” bandied about in economic development for years, but almost always this refers to a foreign manufacturer setting up shop in the U.S., not to the people they might employ here.

While it may be admirable for the folks on the Colorado ED Commission to try to earmark a bushel of new jobs for unskilled locals, the concept that the jobs themselves have no value to the state if the positions are filled by newcomers is hard to swallow. Do the commissioners think the new employees will be commuting to Colorado from Illinois?

No, the new hires will move to Colorado, spend their money there and pay taxes there. The expansion of this health services player not only will fill a critical pediatric care need in Denver; it most likely will attract similar companies to the Denver Metro area, creating even more jobs.

The fact that the applicant has signaled it intends to pick one state as a venue for rapid expansion also would appear to indicate that–if Colorado is not chosen–the firm conceivably could decide to move its current CO employees to Texas.

Memo to Colorado Economic Development Commission: while you’re waiting for a re-application that may not come, you might want to reconsider.

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